New RBI Rules Cap Customer Losses In Online Banking Fraud Cases

New Delhi, Jun 25 (KNN) The Reserve Bank of India (RBI) on Wednesday issued revised directions on limiting customer liability in digital banking transactions, expanding the existing framework beyond unauthorised transactions to cover a broader category of fraudulent electronic banking transactions (EBTs), including both card-present and card-not-present cases.

The revised directions apply to commercial banks, small finance banks, payments banks, local area banks, regional rural banks and cooperative banks. They will come into effect on January 1, 2027, and will cover EBTs conducted on or after that date.

Under the new framework, individual customers and sole proprietors who suffer losses of up to Rs 50,000 due to fraudulent electronic transactions will be eligible for compensation amounting to 85 per cent of the net loss or Rs 25,000, whichever is lower. The compensation is available once in a customer's lifetime. 

To qualify, the fraud must be reported both to the bank and through the National Cyber Crime Reporting Portal or helpline 1930 within five calendar days of the incident.

How Compensation Costs Are Shared

For domestic fraud complaints involving losses below Rs 29,412, where 85 per cent compensation applies, the RBI will bear 65 per cent of the payout, while the customer's bank and the beneficiary bank — where the fraudulently debited amount is first credited — will each contribute 10 per cent. For cross-border cases, the RBI bears 65 per cent and the customer's bank bears the remaining 20 per cent.

For complaints involving losses between Rs 29,412 and Rs 50,000, where a flat compensation of Rs 25,000 is paid, the RBI, the customer's bank and the beneficiary bank will contribute Rs 19,118, Rs 2,941 and Rs 2,941 respectively in domestic cases. In cross-border cases, the RBI contributes Rs 19,118 and the customer's bank contributes Rs 5,882.

If a recovery is made after compensation has been paid, banks must recalculate the amount due and adjust the payment accordingly.

Faster Resolution and Stronger Alerts

Banks will be required to send instant SMS alerts for all electronic banking transactions above Rs 500. Investigation timelines have been tightened: banks must communicate outcomes within 45 days for domestic fraud complaints and 60 days for cross-border cases.

For fraudulent credit card transactions, banks must provide a shadow reversal of the disputed amount within five calendar days of receiving a customer complaint.

(KNN Bureau)